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State of Startups: A New Philly Underdog Story?

A lot has changed since 2007, when Philly Startup Leaders (PSL) formed around a happy hour and a few tech-savvy risk-takers who were lonely for one another. The group has grown to about 1,000 members on its general listserv, many of whom participate in quarterly events that provide resources and support for tech and related startups. It is the largest and most influential group of its kind in Greater Philadelphia.

Most important, as suggested at a recent PSL advisors meeting, is the idea that it's no longer a problem to become a startup company in Philadelphia.

“It's really a problem of how to grow a company in Philadelphia," suggests Chris Cera, a PSL co-founder and currently the group's interim president. “We're still trying to parse that."

This identity crisis, however, isn't just Philly being Philly. It's got nothing to do with an inferiority complex. It's an issue plaguing many American cities that have a nice little proliferation of startups and tech talent but still pale in the shadows of Silicon Valley.

New York, in the last decade, has become a distant (and secure) second fiddle to Silicon Valley, the most innovative and startup-loaded locale in the country. Still, the New York Times wondered early last month whether its city could rival the West Coast hub after Mayor Michael Bloomberg announced plans for an engineering school.

Chris Dixon, the popular startup blogger/early stage tech investor, also wrote at the time about the need in New York City for more successful startups, more web product design talent and engineers and high speed internet throughout the city's startup hubs. Entrepreneur Jason Lorimer wrote on Startup Foundry last month about his first visit to Detroit and how a place like the Motor City can advance its startup community by marketing its challenges as much as its assets, and by avoiding replicating what happens in Palo Alto, Calif. Venture capitalist Fred Wilson also chimed in last month, saying the entire world is now a rival to Silicon Valley.

In Philadelphia, home of America's original entrepreneurs and risk-takers, these same questions and issues arise during a confluence of late-summer and early fall events and programs that will assuredly play a role in defining the future of our startup community.

Last weekend, DreamIt Ventures, the startup accelerator program out of the University City Science Center, welcomed 15 new companies – including seven from Greater Philadelphia – to its three-month program. Tomorrow, Good Company Ventures will celebrate the graduates of its recent program, which incubates social entrepreneurs from around the country and aims to chart a course for strengthening Philadelphia's reputation for social enterprise. Although broader in scope, Ignite Philly returns on Sept. 22 at Johnny Brenda's, where it will shine a light on the city's most important creators and creatives. Next month, the second edition of Philly Startup Weekend goes live on Oct. 14-16 at Drexel, featuring 54 hours of networking, incentives and resources for area startups.

Things really get interesting today at the University of the Arts, where PSL will hold a fishbowl starting at 7 p.m. in an attempt to redefine its purpose and set a course for a future that raises Philadelphia's profile as a legitimate startup hub.

But why now? The organization itself has lost some of its most important leaders.

An Unavoidable Sea Change
Last December, PSL co-founder Blake Jennelle moved to New York for mostly personal reasons. Jennelle helped solidify the group four years ago, especially after an early working meeting to discuss a Fortune magazine story that said VC stud Josh Kopelman spent “half his time in the technological backwater of suburban Philadelphia."

Earlier this year, recently installed PSL president Jameson Detweiler took his recently launched LaunchRock idea (which blew up after a demo at Philly Startup Weekend) to San Francisco for a $50,000 hook-up with the incubator 500 Startups.

"(Jameson's departure) was the impetus for our State of the Union. It made sense for us to reflect," Cera says. “There have been a lot of changes."

Cera, who serves as CTO for Philly software startup Vuzit, a member of DreamIt's inaugural class, has been with PSL since the beginning. He recalls a time when there was a scarcity of information on how to start a business or who was launching a startup in Philadelphia. Cera calls the recent emergence of Philly Tech Meetup, which was imported from New York and features three startups a month, a “new uprising" and is clearly excited about its potential.

While Cera thinks too much is made of people who have bolted Philly for seemingly greener pastures, he admits those departures have created a bit of an identity crisis here.

“Hopefully in a year from now we can talk about the pros and cons of Philly in a more succinct way," he says.

Those departures have also paved the way for fresh faces and ideas. Take Startup Weekend and Startup Digest, for example.

New Faces from Old Places
Philly Tech Meetup isn't the only new star on the startup scene. Brad Oyler was a Philadelphia lifer and Drexel grad who did a bunch of consulting work for large corporations like Merck and also worked on several startups in the last decade. A couple years ago, when he started to see events like Startup Weekend and startup event listings pop up in places like Kansas City and Des Moines, he wondered why those things weren't happening in Philly.

“Some people were saying I was bringing a national brand to Philly," says Oyler. “Now people seem glad they're here."

There are now 1,400 subscribers on the Startup Digest list, which keeps locals apprised of a variety of daily events geared toward or well-suited for local startups. Oyler says initial growth has slowed and he's hoping to get more local universities involved. New York, by contrast, has well over 10,000 subscribers on its digest mailing list, according to Oyler. Also, Oyler says he has noticed a lot of overlap or conflict between events. He believes more collective organizing would strengthen these events.

As for Startup Weekend, its debut was definitely a success earlier this year, with more than 100 attendees and three healthy favorites – Githacking, Launchrock and Artwork Evolution. The 2.0 installment next month is expecting more attendees, judges and learning opportunities.

Oyler expects way more web designers to attend next month's event, which has attracted developers from as far away as California.

“Philly's location is one of its assets," Oyler says. “It's not New York and that can be a good thing. Plenty of (startups) in New York are complaining about being in New York. I think our identity should happen organically."

Another newcomer is Startup Therapy, which only came together last month as a more exclusive group of tech entrepreneurs who are interested in higher level interactions and learning. One of its early members is Todd McNeal, a 27 year-old Pottstown native and Villanova grad who founded Snapline, an e-commerce and social shopping startup, last fall.

“You need to have people at a common level that are comfortable with each other," says McNeal of Startup Therapy, noting that as the area's startup community has evolved, the need for more than basic happy-hour networking and base startup knowledge is evident.

Snapline is set to bring its first customer online in the next couple weeks. McNeal is targeting retailers doing more than $1 million in sales annually and believes Philly is a great place from which to try and find them. And as Snapline moved from concept to reality, he has increasingly been leaning on the local startup community for support.

“It seems there's a sense that Philly is an underdog and we're looking for people to succeed here," says McNeal. “We
want to build them up because it makes everyone better."

Finding Paths to Success and Eliminating Myths
Snapline is just one of dozens of Philly's promising startups. RJ Metrics, Cera says, is almost a “model citizen" in the local startup community. Duck Duck Go, a startup search engine out of Valley Forge, was just named to TIME's Top 50 websites of 2011. Solve Media is building captchas and more dynamic advertising channels. Cloudmine, a current DreamIt company, seems to be on its way to some exciting things geared toward mobile developers.

DreamIt's reputation has only been bolstered since expanding to New York City this summer. It has also helped raise the profile of its flagship incubator, drawing more applications for the current Philly program. One thing DreamIt piloted in New York last month that will not yet make its way to Philly is an additional advisory board of young startups that provides big-brother mentorship from just a step ahead in the startup lifecycle.

“We were able to do that in New York because 12 of our alumni companies are there," says DreamIt Managing Partner Kerry Rupp. “We don't have that same kind of depth in the Philly market."

That speaks to one of the biggest challenges faced by Rupp and others like her. Many of the area's startup successes – and the talent that helped make them happen -- have moved on. DreamIt's biggest success story isn't even an entirely Philly story. Seth Priebatsch, a 17 year-old Princeton freshman, brought something called scvngr to DreamIt in the summer of 2008 and soon began the march to startup success – and moved to Boston months later. Earlier this year, scvngr established a Center City office as it continued the growth of its social, location-based platform for mobile phones.

Keeping startups in Philly as they grow is largely what Dreamit's new program, DreamIt Plus, is intended to address. Partnering with Ben Franklin Technology Partners, DreamIt Plus will allow DreamIt incubator grads to receive additional funding (initiated by angel investment and up to $60,000) and support services to continue working on their companies in Pennsylvania.

“It specifically addresses the fact that those companies aren't ready to raise (VC money) yet," says Rupp. “When companies come out of DreamIt, most are pretty young and VCs want to see traction and metrics before they invest."

Not everyone sees this as such a good thing. Alex Hillman, the co-founder of Old City coworking space Independents Hall -- home to many entrepreneurs and a host of tech talent swimming in the startup stream -- called DreamIt Plus an “unsustainable extrinsic motivator designed to keep talent that DreamIt has been unable to retain" in a July 2 blog post.

That's not to say Hillman, an unabashed boostrapper who values self-sufficiency as much as he does the merits of coworking, is against using a carrot from time to time. He just wants more “doers" in Philly, the kind who won't let a $30,000 gap stand in the way of chasing their dream here.

“It's not so much that I think it's a bad idea, it's that I think we deserve better than the kinds of people/companies this attracts," says Hillman in an email.

And don't get him started on the perceived lack of VC funding in Greater Philadelphia. Even Rupp acknowledges that it's a common cry, even in places like Austin, where she lived prior to coming to Philly more than a year ago, and widely viewed as one of the next great tech/startup hubs. Fact is there well over a dozen VC outfits in Greater Philadelphia, but many are focused on life sciences or are not as quick to jump on a typical tech startup idea. Another learning curve.

Into the Great Wide Open
So tonight is PSL's big night. What to expect? In what kind of direction might Philly's startup community be headed? Before considering that, it's important to take note of Hillman's observations about the local startup scene. There is not one, but rather at least three distinct communities forming under the startup umbrella.

One, he sees as “a hyper-connected community of interest, full of people who are passionate about the idea of startups but don't have a lot of practical experience." Another smaller group is “populated by people who are in the early stages of building a business." The other Hillman cites is much larger than the other two combined and is “driven by pure entrepreneurship."

“These people are the most exciting to me because they're both kinetic and potential energy," Hillman says. “These people are building businesses because they want to, they need to and they've explicitly chosen to do it in Philly or they can't think of a good reason to leave."

Like Hillman, Brian Glick, the founder of logistics software startup Aspect 9 and an early member of Startup Therapy, is among those who believe Philly needs to nurture those folks who are successfully chasing their dreams in Philly with higher-level engagement – both interpersonally and resource-wise.

For PSL, the challenge will be to nurture those while nurturing the next generation. Whether that means rejiggering its listserv or holding more workshops remains to be seen. While many worthy ideas are likely to emerge tonight at UArts, Cera already has an idea for the startup community he is leading.

“The best thing you can do is totally kick ass here."

JOE PETRUCCI is managing editor of Flying Kite. Send feedback here.


Alex Hillman, Kerry Rupp, Brian Glick, and Chris Cera





All photographs by JEFF FUSCO

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